Five Vital Sourcing and Vendor Management Recommendations for Complex Technology Categories

As part of Amalgam Insights’ coverage of the Technology Expense Management market, we provide the following guidance to sourcing, procurement, and operations professionals seeking to better understand how to manage technology expenses.

In immature or monopoly markets where one dominant vendor provides technology services, vendor management challenges are limited. Although buyers can potentially purchase services outside of the corporate umbrella, enterprises can typically work both with the vendor and with corporate compliance efforts to consolidate spend. However, vendor management becomes increasingly challenging in a world where multiple vendors provide similar but not equivalent technology services. To effectively optimize services across multiple vendors, organizations must be able to manage all relevant spend in a single location.

In Telecom Expense Management, this practice has been a standard for over a decade as companies manage AT&T, Vodafone, Verizon, and many other telecom carriers with a single solution. For Software-as-a-Service, a number of solutions are starting to emerge that solve this challenge. And with Infrastructure-as-a-Service, this challenge is only starting to emerge in earnest as Microsoft Azure and Google Cloud Platform rise up as credible competitors to Amazon Web Services.

To effectively manage sourcing and vendor management in complex technology categories, Amalgam suggests starting with the following contractual steps:

Align vendor and internal Service Level Agreements. There is no reason that any vendor should provide a lower level of service than the IT department has committed to the enterprise and other commercial partners.

Define bulk and tiered discounts for all major subcategories of spend within a vendor contract. Vendors are typically willing to discount for any usage category where a business buys in bulk, but there is no reason for them to simply hand over discounts without being asked. This step sounds simple, but typically requires a basic understanding of service and usage categories to identify relevant categories.

Avoid “optional” fees. For instance, on telecom bills, there are a number of carrier fees that are included in the taxes, surcharges, and fees part of the bill. These charges are negotiable and will vary from vendor to vendor. Ensure that the enterprise is negotiating all fees that are carrier-based, rather than assuming that these fees are all mandatory government taxes or surcharges which can’t be avoided.

Renegotiate contracts as necessary, not just based on your “scheduled” contract dates. There is no need to constantly renegotiate contracts just for the sake of getting every last dime, but companies should seek to renegotiate if significantly increasing the size of their purchase or significantly changing the shape of their technology portfolio. For instance, an Amazon contract may not be well-suited for a significant usage increase of a service due to business demand.

Embed contract agreements and terms into service order invoice processing and service management areas. It is not uncommon to see elegant contract negotiations go to waste because the terms are not enforced during operational, financial, or service management. Structure the business relationship to support the contract, then place relevant contract terms within other processes and management solutions so that these terms are readily available to all stakeholders, not just the procurement team.

Effective vendor and contract management is an important starting point to support each subsequent element of the technology lifecycle to enforce effective management at scale. In future blogs, we will cover best practices for inventory, invoice, service order, and lifecycle management across telecom, mobility, network, SaaS, and IaaS spend.

Amalgam Insights: 2019 Shaping Up as “Turbulent” Year for Technology Budgets, With Cost Controls Taking Center Stage

Technology Expense Management, analyst firm says, can help companies adopt a “more careful approach…and a cost-efficient working environment.”

A new report from industry analysts Amalgam Insights warns that this year will represent what it calls a “change for companies that have managed digital transformation & technology investment in bull markets” of the previous several years. But it says several sectors within the technology expense management (TEM) environment remain posted for significant growth, with the telecommunications industry leading the way, with a projected 15-20 percent spending increase.

Amalgam Insights chief analyst Hyoun Park authored the new report, saying the enterprise mobile sector spend will be a key driver. He says spending in this area should increase by as much as 15 percent in 2019, driven by what he calls “the incessant demand for mobile data from apps, video, music, and other persistent and constantly updating workloads.”

He also predicts that Amazon Web Services, Microsoft and Google Cloud Platform will continue to rake in more revenue, with an estimated run rate of $30 billion this year; he projects that amount could easily hit $50 billion in 2020.

Other predictions from the new Amalgam Insights report:

  • Software as a Service (SaaS) will be a $75 billion market by next year;
  • The Internet of Things (IoT) market will continue to be in flux, due to its complexity, with companies challenged to monetize the two billion non-cellular Internet of Things devices to be created for industrial, commercial, and enterprise; and
  • Most importantly, the technology expense market will double to more than two billion dollars over the coming year.

“Over half of enterprises do not have basic technology spend practices in place,” Park says. “The most frequent mistake these companies make is assuming that they’ve assigned a person to processing telecom invoices, so those people know how to manage and optimize telecom bills and contracts, which is usually not true.”

The full Amalgam Insights report is available for download at: https://amalgaminsights.com/product/analyst-insight-7-key-technology-expense-management-predictions-for-2019

From Calero World Online: From TEM to ITEM: Leveraging TEM for Non-Traditional Expenses

On October 18th, I presented a webinar at Calero World Online on the future of IT cost and subscription management. In this presentation, I challenge existing telecom and IT expense management managers to accept their destiny as pilots and architects of enterprise digital subscriptions.

Telecom expense has traditionally been the most challenging of IT costs to manage. With the emergence of software-as-a-service, cloud computing, the Internet of Things, and software-defined networks, the rest of the IT world is quickly catching up.

In this webinar, you will learn:

  • How the latest trends and technology are driving change to enterprise management strategies
  • How the challenges of traditional TEM and cloud expense management are similar in nature (and why TEM is a good place to start)
  • How organizations are benefiting from ITEM best practices using sample use cases

To learn more about the upcoming challenges of IT expense management, aligning technology supply to digital demand, and being the shepherd for your organization’s technology sourcing, utilization, and optimization, click here to watch this webinar on-demand.

Why Oktane Has Become The Most Important SaaS Event of the Year

Key Stakeholders: Chief Information Officers, Chief Digital Officers, Chief Information Security Officers, Security Directors and Managers , Security Operations Directors, IT Architects, IT Strategists, Identity and Access Directors and Managers, Software Engineers, Cloud Strategists

Why This Matters: Cloud and digital strategists who are not attending Oktane risk missing out on key SaaS and IT management strategies emerging in an end-user centric model of IT.

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4 Predictions on the Future of IT Consumption

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At Amalgam Insights, we have been focused on the key 2018 trends that will change our ability to manage technology at scale. In Part 1 of this series, Tom Petrocelli provided his key Developer Operations and enterprise collaboration predictions for 2018 in mid-December. In part two, , Todd Maddox provided 5 key predictions that will shape enterprise learning in 2018. In the third and final set of predictions, I’m taking on key themes of cloud, mobility, telecom, and data management that will challenge IT in terms of management at scale.

  1. Cloud IaaS and SaaS Spend under formal management will double in 2018, but the total spend under formalized management still be under 25% of total business spend.
  2. The number of cellular-connected IoT devices will double to over one billion between now and 2020.
  3. Technology Lifecycle Management will start to emerge as a complex spend management strategy for medium and large enterprises.
  4. Ethical AI will emerge as a key practice for AI Governance.
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